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“Cash flow is king.” — Anonymous
Small businesses are the engine of our economy. They create jobs and drive commercial activities.
As a result, the government designed the tax code to provide businesses with favorable tax breaks. These tax breaks are incentives used by the government to encourage new business startups.
As a business owner, besides the tax breaks you enjoy, you get to be your own boss. You have flexibility to manage your schedule. You have the freedom to explore your creativity. And you get great fulfillment by serving your clients and contributing to your community.
But, getting a new business off the ground can be challenging. I know this based on my experience of running different businesses and working with many clients that run their own businesses.
Although the internet has made it relatively easy to start an online business, it is still challenging to be successful. It requires significant amount of work and the majority of new online startups still fail in less than one year. Very few make it past 2 years and fewer make it past the 5-year mark.
According to a CNBC report, one of the primary reasons businesses fail shortly after their launch is running out of cash.
So, if you’re considering starting a new business or if you started one recently, you must take steps to ensure your cash flow management is strong.
“Happiness is a positive cash flow.” — Fred Adler
Here are 7 tips to help you manage your cash flow.
1. Keep a healthy gross profit
Before you jump into any business, always have a good understanding of what your gross profit is.
Your gross profit is your gross revenue less all the direct costs required to provide the service or product you’re offering.
To have a profitable and sustainable business, you want to have a gross profit ratio of 50% or higher. This…
